BWorld 40, CCT vs other welfare programs, SSS vs pension deregulation

* This is my article in BusinessWorld the other day, January 27.

It appears now that there are many data showing that the conditional cash transfer (CCT) is good and successful in reducing poverty. Good, then it is now time to abolish other existing welfare programs that were failures. Each new welfare program is an admission that other existing welfare programs are wasteful and unsuccessful in reducing poverty.

Let us count some of those existing welfare programs: Books and education for the poor, medicines and PhilHealth for the poor, housing and relocation for the poor, credit and agrarian reform for the poor, irrigation and rural roads for the poor, MRT/LRT subsidy for the poor, jeepney diesel subsidy and e-trikes for the poor, rice price subsidy for the poor, condoms and pills for the poor, public Wi-Fi for the poor, etc.

There is an endless, no timetable, and even expanding welfare programs for the poor. Which means there will be endless and expanding taxes, fees, fines and penalties, and mandatory contributions for the rest of the population. These benefit the poor, non-poor who pretend to be poor, and the many layers of legislators and bureaucracies that administer these endless welfare and entitlement programs.

A warning: CCT is a targeted program, targeting the “poorest of the poor.” This is not possible actually because many of these people are highly mobile in the midlands and uplands. They don’t have IDs, they seldom stay at home, and cannot attend the mandatory, regular meetings by the Department of Social Welfare and Development (DSWD). They are always in the mountains, hunting or cutting trees, producing firewood and charcoal, and so on.

So by convenience, those who can regularly attend DSWD seminars and not blacklisted from the program are those who have some means to stay at home. Like a spouse or one older child has regular work, or working abroad and sending money regularly.

SSS MEMBERSHIP SHOULD BE OPTIONAL

Our social security insurance and pension system should be deregulated.

Membership in the government Social Security System (SSS) monopoly corporation should not be mandatory and by coercion. The people should have more choices, more freedom, to whom they should trust their current contribution for their future pension fund.

This measure can be called as “pension fund deregulation,” not “SSS deregulation or privatization.”

SSS can be retained as a government-owned corporation, need not be privatized, but membership with it should be voluntary, not mandatory.

If people have more choices, it is doubtful that SSS as we know it now can get millions of members. SSS officials are always beholden to the high-level politicians who recommended and appointed them there, not to the actual contributors from the private sector.

SSS, GSIS, PhilHealth, and Pag-IBIG business model is so 1950s or 60s: Filipinos are assumed to be non- or less-mobile, they will work, retire, and die here in the country. This is wrong because millions of Filipinos now are very mobile across the globe, and the Philippines also attracts millions of mobile and foreign professionals, some of whom have decided to settle down here.

Global and multinational pension funds should be allowed to compete with SSS. So Filipinos who work here for 10 years or so, then move to other countries in Asia, Europe or north America should have ALL of their contributions from Day 1 in the Philippines counted. These contributions should be portable and can be utilized once they decide to retire whenever and wherever they wish.

The arrangement should be the same for foreigners who contribute to such pension fund -- if they choose to retire here in the Philippines, they can enjoy the full benefits even if they contributed for 10, 20 years in another country.

Governments in many countries are often jurassic central planners. They are incapable of highly flexible policies, they survive only via rigid and inflexible policies, that is why things -- like social security, pension, health insurance, housing insurance -- are made mandatory, obligatory, by force and coercion.

Currently, if a Filipino has worked here for 20 years and contributed faithfully to those funds then move and work abroad, retire there and come home only to visit friends and families, all of their contributions are non-portable and hence, cannot be used in their adopted country. Such contributions only make the Directors and Commissioners (most if not all are political appointees) and employees of SSS become richer.

The same can be said of foreigners who later settled down in the Philippines. Their contributions in their mother countries will not be honored by SSS here.

If membership in SSS is not mandatory, it will become more responsive, more sensitive, more friendly to members. If members are unhappy, they can opt out and stop contributing to SSS and go to another private pension fund.

The Philippine government guarantees solvency of the SSS. Can a private pension fund promise a similar assurance?

Good question, and a multinational private pension fund, or local but in close alliance with international and global pension funds, will have the financial muscle to ensure solvency. It is among the first questions that members who have the privilege to opt out will be asking, and the fund/s who can provide convincing answers will get more subscribers.

Thus, SSS membership will not be made mandatory. What should be mandatory is that ALL people should have social security insurance.

When there is competition, public and private players tend to be more customers-friendly and sensitive. Where there is zero competition, many ugly features and wastefulness of a monopolist can be observed. We see many of such wastes and inefficiencies in the current SSS.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers, and a Fellow of the South East Asia Network for Development (SEANET). minimalgovernment@gmail.com

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See also:

BWorld 36, What if the Philippines splits into many new island-countries?, January 06, 2016 

BWorld 37, World rule of law index and the Philippines, January 11, 2016

BWorld 38, Climate change and the need for cheap energy, January 14, 2016

BWorld 39, Coal and renewables complement each other, January 26, 2016

Welfarism 9: Conditional Cash Transfer (CCT), November 12, 2010 
Welfarism 22: CCT, 4Ps and Central Planning, October 14, 2012 

Welfarism 31: More CCT and Subsidy Programs Won't Solve Self-inflicted Poverty, February 12, 2015

Inequality 4: Why Inequality is Good

(This is my article yesterday in thelobbyist.biz)

Inequality is good because it respects and rewards hard work, efficiency and ambition. The self-driven, the self-reliant and highly ambitious among us will ultimately rise to the top because they are never complacent. They are always moving, constantly innovating and improving on old ways and technologies.

On the other side of the fence, there are people who have little or zero ambition in life. To drink and party everyday, to rely on some outside support – from parents, siblings, friends, government welfare, and so on – for their continued existence, these are their simple joys and complacency.

Between the two, and many others in the middle, inequality is sure to happen in the short term, and such inequality will widen over the long term.

Friedrich Hayek, the famous Austrian economist-philosopher, wrote in Chapter 3 of his book, The Constitution of Liberty (1960),

The rapid economic advance that we have come to expect seems in a large measure to be the result of this inequality and to be impossible without it. Progress at such a fast rate cannot proceed on a uniform front but must take place in echelon fashion, with some far ahead of the rest.

The highly ambitious, the highly innovative and inventive among us, are the key risk-takers in society. They are the ones who first invented the cellular phones, the computers, the flat tv, the new rice and corn variety, the new disease-killer drugs and vaccines. We see only the more successful products, and that is where envious eyes and minds are watching. We do not see the unsuccessful products made by other inventors which failed to show up in the shops, malls and supermarkets.

All those government welfare and entitlement programs that are meant to reduce inequality and improve equality among the people are mostly unproductive, some are even counter-productive and destructive. When being poor is rewarded with lots of welfare programs like education for the poor, healthcare for the poor, housing for the poor, credit for the poor, agrarian reform for the poor, cash transfer for the poor, and probably soon, condoms and ligation for the poor, and such programs have no timetables, then there are incentives to remain poor.

Here is Hayek’s additional position on the matter:

Improving the position of the poorest by giving them what we took from the wealthy, would temporarily quicken the closing-up of the ranks, it would, before long, slow down the movement of the whole and in the long-run hold back those in the rear. All obstacles to the rise of some are, in the long run, obstacles to the rise of all… To prevent progress at the top would soon prevent it all the way down.

The implication of this is that government policies of institutionalizing forced equality, of confiscating a big portion of the incomes of the rich and self-driven people so that government will have lots of money to redistribute to others is dangerous. The mistake rests not only in penalizing hard work, performance and being ambitious, but also in rewarding people who are in the “confiscate here, subsidize there” programs.

When the poor and initially less ambitious see that there are less entitlements coming, when there are less taxes, regulations and bureaucracies if they become hard-working and entrepreneurial too, then they will become more self-driven and independent, less dependent on politicians and the state. And society can progress even faster.

Continued programs and policies that reallocate people’s talent away from more innovation towards more forced income redistribution, is among the scourge of modern human civilization.
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See also:
Inequality 1: Rich Getting Richer is Good, August 29, 2009
Inequality 2: To Each According to his Needs... September 01, 2010
Inequality 3: Freedom, Free Market and Inequality, February 14, 2011
Hayek 3: Inequality and Progress, May 19, 2009